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The proposed increase would add 37 cents per $1,000 of assessed value to the current $19.41 property tax rate. The proposed $102 million fiscal year 2015 education budget could add 36 cents to the tax rate, for a total increase of almost 3.8 percent.

Before accepting the municipal budget for further review, city councilors also approved a $3.3 million spending plan including $1.8 million of Community Development Block Grants for housing, employment training and social services. The spending also includes about $1.1 million in other federal grants.

Councilor David Marshall recused himself from the block grant votes because his wife works part-time at one of the affected agencies.

The largest amendment to Rees's block grant spending plan was to remove $30,000 of the $51,000 allocated for Health Care for the Homeless at Preble Street Resource Center that helps fund operations at Florence House, a shelter for women on Valley Street.

The budget review by the City Council Finance Committee begins Thursday at 6 p.m. in City Hall room 209. The City Council is scheduled to formally accept the school budget at a 6 p.m. meeting Monday, April 14.

A public hearing on the municipal budget is scheduled for May 5 at 7 p.m.

In his budget preview, Rees said the city is benefiting from an expanding economy that saw private investment nearly triple from $32 million in fiscal year 2012 to $91 million in fiscal year 2013. He said the city tax base has increased by $87 million.

In all, Rees has budgeted for $176 million in revenues, an increase of $5.4 million, including an excise tax revenue gain of $600,000. He said he would like to "restructure building permit fees so that they are in line with surrounding communities," and expects the changes to add $200,000 in revenue.

Rees said he also reduced department budget requests by $3.7 million and looks to use $625,000 in city reserves to fund the budget. State revenue sharing of income and sales tax revenues has been reduced by $325,000 to $1.9 million, but employee health insurance premiums will increase by 1.8 percent.

While spreading good economic news about investment in the city, Rees noted the cost of caring for low-income and homeless residents is increasing. He said the cost of social services is expected to increase by almost $1.28 million to $13.28 million, with a net cost to taxpayers of $155,000.

While councilors acknowledged the difficulty of awarding the federal block grants and praised the CDBG Annual Allocation Committee for its work through the winter, the decision not to fund the Florence House led to several motions to try to restore the funds.

The benefits of the Valley Street shelter were presented by several residents who said staff helped them overcome drug addictions and eventually find homes of their own.

But Florence House was eliminated from consideration when Amistad and Wayside, two other programs serving homeless and low-income residents, earned bonus points because of the community needs they serve.

On a motion from Councilor Jill Duson, the funding for Health Care for the Homeless was reduced. The program at Preble Street will end this fall as it shifts to the Community Health Center through a federal grant.

What funding had been intended for the program would pay for behavioral health and dental services during the transition period.